Can I Transfer My Loan To Someone Else?

Most Canadians require some financial assistance when purchasing a home, a car or some other major expense. In most cases, Canadians will rely on loans to help them finance these major expenses.

But what if you want to get rid of your loan earlier as a result of a significant improvement in your income? Or what if you’ve been able to find a loan from a different lender at much better terms and a lower interest rate?

More specifically, what if you were able to find someone willing to take over your loan? Would you be able to transfer it to that person? The answer to this question depends on the exact type of loan you are thinking of transferring, so let’s take a look at a few.

Can You Transfer Your Mortgage To Another Person?

If you bought a home with a 5-year mortgage, but after 4 years you decide you want to sell it, you’ll have three main options:

Break The Contract – You can sell your home by breaking your mortgage contract early, but you’ll likely have to pay a hefty penalty fee for it.
Port Your Mortgage – You can transfer your mortgage to your new property. This is often a good choice for those who are buying a new home while selling their old home.
Transfer Your Mortgage – You can transfer your mortgage to the buyer. However, for this to work, your buyer must agree to this agreement. This scenario is often ideal since the new owner will not have to take out a new mortgage, which may often come with a higher interest rate.

How To Transfer Your Mortgage To Another Person?

Before the mortgage can be transferred, the contract must stipulate that it can be assumed by someone other than yourself. A mortgage that is “assumable” means that the outstanding balance may be transferred to another individual.

In addition, the new owner will still need to get approved for a mortgage, which means the lender will still want to look into the buyer’s credit score, financial history, and income to make sure they’ll be able to make the mortgage payments and be at low risk for default.

Alternatives To Transfering Your Mortgage

If your mortgage is not eligible for transfer from one person to another, you may want to consider refinancing if you’re set on getting rid of it. Refinancing will allow you to take out a new loan in order to pay off your existing home loan and is often done when a lower interest rate can be obtained.

Can You Transfer Your Personal Loan To Another Person?

Since personal loans are based on your specific financial health, income, and credit score, they can’t be transferred to someone else. Your lender initially extended the loan to you after assessing your specific financial situation and deciding that you were low-risk enough to be approved for the loan. If the personal loan was transferred to another person, the lender could likely be at risk if the person that the loan is being transferred to has a poor credit score and a sketchy financial history.

The only way that you would be able to get rid of a personal loan is to fully repay it.

Can You Transfer Your Car Loan To Another Person?

If you want to transfer your car loan to someone else, you have a couple of options to choose from.

Switch Lenders – One way to transfer the car loan to another person is to switch lenders who will then extend the credit needed to pay off the rest of the loan balance and a completely new loan would be issued to the other individual. You will likely incur some penalty charges if you take this route and your credit score may even suffer as a result.
Ask Your Lender – Another way to transfer your car loan that doesn’t require changing lenders is to inform your current lender that someone else will be paying off the remainder of the loan. In this case, the other person would have to undergo the typical financial assessments before they are approved to take over. This tactic will probably cost you less in penalty fees.
Sell Your Vehicle – While this option doesn’t transfer the car loan, it is a good way to get rid of the car loan. If your car value is more or equal to what you owe on the car, you can sell it privately and then use the money to pay off the loan.

Can You Transfer Your Student Loans To Another Person?

Sometimes parents may want to take over their children’s student loans in order to relieve some of their debt and get it off their credit report. It may be possible to have the student loan transferred, but only if the lender agrees to this arrangement.

Moreover, many lenders will likely not have much incentive to transfer the student loan because these types of loans are typically not dischargeable. If the loan was transferred, the lender could potentially be at an increased risk if the person that the loan is being transferred to defaults on the loan at any point.

How To Transfer Your Student Loans To Another Person?

Generally speaking, student loans usually aren’t put in someone else’s name aside from refinancing them into a new loan. In order to have the loan placed in someone else’s name, you would have to refinance it to another loan. If the new loan in the new person’s name is used to pay off the old loan, it will change the borrower and the terms of the loan.

Additional Reading

Transferring A Loan FAQs

Can I transfer my loan to someone with bad credit?

Generally, your lender will assess the person you’re transferring the loan to. If they fail to meet the lender’s requirements, it is unlikely they will transfer the loan to them. The person you plan on transferring the loan to should have equal or better credit than when you applied for the loan.

Will transferring my car loan to another person hurt my credit score?

No, your credit score shouldn’t be affected when transferring your car loan to another person. The main way it may be affected is when you miss payments on your loan.

Can I transfer a personal loan to another person?

Generally, personal loans cannot be transferred to another person because personal loans are given based on your specific financial details. The only way to get rid of a personal loan is by repaying it in full.

Final Thoughts

Loans exist for a reason: to help consumers make large financial purchases that their existing finances might not necessarily be able to cover in one lump sum. That being said, you may no longer want or even require your loan at some point in the future if your situation changes. In this case, you will have to look into whether or not your specific type of loan can be transferred to someone else if you’re able to find a willing taker.

What you need to do is speak with an experienced loan specialist or financial advisor who will be able to inform you whether or not your loan can be transferred, and if so, guide you through the transfer process so that you come out on the other side with minimal penalties incurred.

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Lisa Rennie

Lisa has been working as a writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same. She's used a variety of financial tools over the years and is currently growing her money with Wealthsimple, while stashing some capital in a liquid high-interest savings account so that she always has a financial cushion to fall back on. She's also been avidly using her Aeroplan TD credit card to collect as many Aeroplan points as possible to put towards her travels!